The Parliamentary Ombudsman has urged ministers to apologise to Equitable Life policyholders and compensate them for any money they may have lost as a result of its regulatory failure.
In her report into the Government's regulation of the mutual, Ann Abraham said she found evidence of "serial regulatory failure" for more than a decade.
She accused the former Department of Trade and Industry (DTI) and the Government Actuary's Department (GAD) of being "passive, reactive and complacent" in their regulation of the society before July 1998.
She added that between July 1998 and December 2000, the regulators' actions were "largely ineffective and often inappropriate" despite them being aware of the society's growing problems.
Overall, she identified 10 instances of maladministration by the DTI, GAD and the Financial Services Authority in the period leading up to December 2001.
She called for a compensation scheme to be established to assess the individual cases of current and former policyholders and to compensate them for money they had lost as a result of the problems at Equitable.
The report comes after Equitable abandoned its £3.3 billion legal action against its former auditor Ernst & Young and settled with its 15 former directors, whom it had been pursuing for £2.6 billion.
But policyholders will have to wait until at least the autumn before they learn if the Government will follow the Ombudsman's recommendations.
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